The Vanguard Group's investment counseling and research division has just released a report comparing the advantages of equity mutual funds and separately managed equity accounts.
The study concludes that for all but very large accounts, mutual fund advantages are diversification, professional management, and cost effectiveness. This could be attributed to the fact that a mutual fund is a registered investment company and is usually larger scale.
As for SMAs, their advantages have to do with issues of control. They allow for direct ownership of securities, transparency of holdings within the portfolio, and the option of custom stock pick.
The study also concludes that potential tax-management benefits of separate accounts have the tendency to weaken as time goes by. For taxable investors, tax-managed mutual funds could just be the better option.